By Teresa Rivas

Cisco Systems (CSCO) has been having a rough day, as investors sell the stock following its mixed first-quarter earnings report and disappointing guidance, and analysts were largely downbeat about the company’s prospects.

MKM Partners analyst Ashok Kumar has a note out today with read-throughs for other tech names following Cisco’s earnings report. He thinks the report is mostly negative for other names, although to varying degrees, given that Cisco highlighted a more cautious spending environment, especially in emerging markets, and that the macro outlook is outweighing company-specific drivers in many cases.

Read his thoughts on five Buy-rated names below:

Aruba (ARUN): Cisco’s wireless revenues of $540 million declined 15% q/q but were up 11% y/y. Management noted that wireless continues to be a bright spot despite the slowdown from the 29% y/y growth last quarter. Aruba likely gained WLAN share as Cisco suffered order push outs due to the transition to the new wireless standard – 802.11ac. Cisco’s competitive 802.11ac access point will be available late November. We expect Aruba to meet the low revenue bar set for October quarter. However Aruba is investing heavily to drive growth which will likely limit earnings performance. Net: modest negative for ARUN.

Cavium (CAVM): Cavium generated 18% of sales from Cisco in the September quarter. The company supplies security and multi-core processors into the Cat 3000 switch line among other platforms. While sales to Cisco were up 10% q/q in September, they have declined y/y for six quarters. Cavium’s December guidance reflects strength in enterprise and wireless partially offset by weakness in wired. Cisco is expected to remain the largest customer for Cavium over the forecast period. Net: negative for CAVM.

EZchip (EZCH): Cisco represented 44% of sales in the September quarter. EZchip’s NP-4 NPU is used by Cisco in three edge router platforms – ASR9000, ASR5000 and ASR1000. ASR9000 was up 20% y/y or slower than the 69% y/y growth last quarter. A partial offset is share gains in edge routing by Juniper (JNPR), another key customer. EZchip guided for seasonal performance of 5% sequential growth in December. Net: negative for EZCH.

LSI (LSI): LSI supplies ASICs to Cisco that goes into a number of their high-end platforms. LSI also supplies Cisco’s Scientific Atlanta division with disk drive controllers for DVRs. The set-top box division faces long-term negative trend as these legacy solutions become commoditized. However growth may come from next generation CPE (customer premise equipment) where LSI has design wins. Cisco represents less than 10% of sales. Net: modest negative for LSI.

Radware (RDWR): For Cisco, all regions were down on a sequential basis with EMEA witnessing the most declines – off 7% q/q. Backlog in EMEA also fell 4% y/y. EMEA is critical to Radware’s turnaround. Net: modest negative for RDWR.

Add a Comment

We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comment

There is 1 comment

NOVEMBER 15, 2013 1:13 A.M.

Anonymous wrote:

What's Cisco's reason for involving itself charitably with losers like BCE, Bell Cananda, Canadian Tire, Blackberry and Samsung? Especially BCE who could give away all of its profits and still not win any love or respect because it's better they go to hell than pretend they're god. Hopefully Verizon will put them in their place. These corporations have one responsibility and that's to the investors and consumers. If the execs want to save the world then do it with your own money on your own time.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.